LOS ANGELES — It was a tense negotiation. Fox Sports and ESPN were paying about $54 million a year for TV rights to Pac-12 Conference games. The Pac-12 guys wanted five times that. And a 12-year commitment.
The networks were so taken aback that a top executive sarcastically asked if the Pac-12 was smoking something, according to people who witnessed the exchange but spoke on condition of anonymity because of the sensitive nature of the deal.
But in the end, the two sides agreed to the biggest TV rights contract in college sports history — a 12-year, $3 billion deal, which works out to a per-year average of $250 million.
Some of the power behind the deal came from Evolution Media Capital, a boutique investment bank and advisory firm founded in 2008 by Rick Hess, who was head of Creative Artists Agency's Film Finance Group, and Robert Stanley, who had been in charge of Merrill Lynch's entertainment and intellectual property group.
EMC has quietly become a force in both the entertainment and sports worlds. Staying out of the limelight, the firm, which counts CAA as one of its owners, has orchestrated more than 20 deals with a combined value of $15 billion.
"We've built a very formidable company below the radar," said EMC partner Alan Gold, who specializes in sports media.
EMC had a lot to do with making the Pac-12 deal fly. The advisory firm observed that cable giant Comcast was about to close on its purchase of NBCUniversal. EMC was betting that Comcast would want to make a big splash in sports rights for NBC Sports Network as a way of competing with rivals ESPN and Fox Sports. Hess and Stanley advised the Pac-12 to wait for Comcast to emerge as a bidder before shopping the rights.
"I knew it was under-leveraged," Pac-12 Commissioner Larry Scott said. "EMC provided me some great advice and counsel, and as a result I made some significant changes to the structure of the conference."
Among those changes were the addition of two schools, making the Pac-10 the Pac-12; creating a football championship game; and launching its own cable channel next August. The result: Comcast ended up offering about $225 million a year, driving Fox and ESPN to raise their offer to $250 million.
Among the sales that EMC had a hand in were the Texas Rangers for $550 million, the Philadelphia 76ers for $280 million and entertainment company CKX for $509 million. EMC also negotiated pricey new TV deals for the Boston Celtics and San Diego Padres and advised the Michael Jackson estate on its refinancing of the Sony ATV Beatles library. EMC is representing investor Stanley Gold and the Disney family in their effort to acquire the Dodgers.
For CAA, which holds a large stake in EMC and houses the firm in its Century City, Calif., headquarters, the relationship is part of its strategy to expand beyond its traditional talent representation and create new revenue streams at a time when the movie and TV industries are tightening their belts.
Behind the formation
Hess and Stanley met in 2006 at a meeting that CBS Chief Executive Leslie Moonves was having with Hollywood heavyweights and bankers to discuss his company's plans to launch a movie studio. The two quickly recognized that there were a lot of similarities in their jobs.
Hess had been with CAA for five years, working with high-net-worth individuals who were investing in movies. Stanley had worked on deals involving Marvel Entertainment, Summit Entertainment and United Artists.
"I found myself getting into larger transactions and interfacing more with Wall Street banks," said Hess, 49. "It was an area that was logical to grow into for CAA."
Stanley, 37, realized that lining up jobs for actors was not all that different from lining up money for deals.
"The agents at CAA are like investment bankers," Stanley said, but they have knowledge of the entertainment and sports business "that has more depth than bankers."
Although EMC has brokered deals in traditional entertainment and the digital space, sports has become the "jet fuel to our business," Hess said.
The sale of the 76ers exemplifies the mix of personalities that EMC can bring to the table. The company assembled an eclectic mix of investors, including Indonesian sports and media mogul Erick Thohir, movie star Will Smith and Smith's production partner James Lassiter.
The deal gave Thohir a presence in the American sports marketplace. Plus he found that there were other perks to doing business with EMC.
"They invited me to the Oscars," he said, laughing.